Putin promised his government would submit legislation to make Russia more business friendly before the end of the year and introduce the position of an ombudsman to champion investors' rights.

"We won't be able to tackle any issue in the economy or social sphere unless we fix the situation with the business climate," Putin said in his annual address to Parliament.

Russia's gross domestic product grew by 4.3 percent last year, but Russia also recorded a capital outflow of $84 billion, which signals domestic and foreign investors' decreasing confidence in the future of the economy.

Investors have long complained about corruption and extensive bureaucracy that hampers investment. Outgoing President Dmitry Medvedev made the investment climate a priority of his rule but his policies have not achieved any tangible results.

Putin, who was Russia's president between 2000 and 2008, was elected for the third term in March. He won amid an unprecedented wave of street protests stemming from allegations of widespread vote rigging in December parliamentary election.

Russian Prime Minister Vladimir Putin speaks at a meeting of the guardian council of the Russian Geo …

A few hours before his speech, several opposition activists were detained outside the Parliament building when they attempted to stage an unsanctioned rally.

In an apparent reference to the opposition protests, Putin urged political parties to work together for the good of the country, saying unity is necessary for the shared goal of development.

During his presidential campaign, Putin promised higher wages and benefits for soldiers, doctors and teachers. Analysts estimated that they could cost about $160 billion over his six-year term.

Economists say the government can afford the extra spending as long as the price of oil remains high. In response to a lawmaker's question Wednesday, Putin insisted that all of his promises had been well-thought and are sustainable with oil prices at $70 per barrel.

The current price of Brent crude oil that Russia uses is currently $120 per barrel.

Putin shrugged off the complaints of the opposition Just Russia faction over a mayoral election in the southern city of Astrakhan, which the party's candidate Oleg Shein said was rigged.

Putin advised Shein, who has been on a hunger strike for 27 days in protest, to go to court instead. His remarks prompted the Just Russia lawmakers to leave the session hall in protest.